Speculation is widespread about whom the Trump administration might select to head the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), but given who's leading the president-elect's financial regulatory transition team, one should expect a pair of fervent free-market capitalists to be nominated.
Former SEC commissioner Paul Atkins is working on President Trump’s transition team and Ian Katz, policy researcher at financial consultancy firm Capital Alpha Partners, LLC, said in panel discussion Thursday sponsored by the Wall Street Journal Pro that Trump’s nominees are likely to reflect his staunch opposition to regulatory intervention in financial markets in their policymaking.
“The SEC is now in the process of doing rules on asset managers and they’re only part-way through,” Katz said at the event. “With asset managers, it’s a much more recent thing [than banking rules], so a lot of this can be undone.
“To the extent the rules stay on the books, there can be a much lighter touch in enforcement,” Katz said.
A light touch or heavy hand?
Brian Gardner, managing director of financial services firm KBW, joined Katz on the panel and said he believes President-elect Trump’s appointees will possess less regulatory fervor than those appointed by the Obama administration, but he doesn't expect dramatic policy changes.
“I think there will be a lighter regulatory touch, but they’ll probably work around the margins,” Gardner said. “It’s not like the SEC is going to come in and rework the Volcker Rule.”
Formally known as section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Volcker Rule was approved by five federal agencies, including the SEC, in 2013. The Volcker Rule prohibits banks from engaging in proprietary trading or from owning or sponsoring hedge funds or private equity funds.
Katz disagreed with Gardner, stressing the significant role the commissioners play in establishing the mentality of their agencies.
“I’m going to go a little bit farther than [Gardner’s] view [and say] that people at top of these regulators really, really matter,” Katz said. “If some enforcement action or policy gets up to the chairman’s desk and he or she sort of shrugs, that sort of tone sends a message from the top and makes a huge difference.”
A belated thanks.
Following the nomination process, the Trump administration should have an easier path to Senate confirmation thanks to an unlikely source — Sen. Harry ReidHarry Mason ReidTo Build Back Better, we need a tax system where everyone pays their fair share Democrats say Biden must get more involved in budget fight Biden looks to climate to sell economic agenda MORE (D-Nev.). Reid led a movement in 2013, eliminating filibusters for most presidential nominations.
“Republicans owe Harry Reid a debt of gratitude,” Gardner said. “The names that Trump sends up are going to need a simple majority instead of the 60 [votes]. For [Sen. Elizabeth] Warren, that deprives her of some leverage she may have had otherwise."
Anyone but Warren.
Regardless of who's nominated, the people who are not being considered may be more important to market participants, Gardner said.
“The significance is that Warren’s allies are not getting top spots,” Gardner said.
Warren, a Democrat from Massachusetts is known for her staunch advocacy of heightened financial regulation. Many industry participants expected her to play a meaningful role in the selection of financial regulator nominees had Hillary ClintonHillary Diane Rodham ClintonDemocrats worry negative images are defining White House Heller won't say if Biden won election Whitmer trailing GOP challenger by 6 points in Michigan governor race: poll MORE won the White House.
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